Public Company Accounting Oversight Board

So having been close to the capital markets in my previous career, there were things that I knew to do that allowed us to move really quickly.

So an example was the PCAOB audit.

So you have to do a public company accounting audit if you're going to get through this.

That's something that takes you many, many months to get through.

I've read it many times, and, uh, well-intentioned, and really a lot of positivity is you can tie back to the act and how there's, uh, really good awareness of, of internal controls and their importance when it comes to financial reporting and all of that.

And so that act created the PCAOB, which became the, uh, institution that started to oversee the external auditors.

And after the act was passed, the PCAOB was formed, and then they wrote up some standards about, okay, how is this gonna actually be implemented, and how will external audit firms go about, um, issuing opinions that the act required them to, to do around internal control over financial reporting? So we started with AS2, and, uh, the way that people interpreted, uh, the AS2 act, it really r- required folks to, to dive into a heck of a lot of detail, really documenting everything, right? Going through a lot of detailed walkthroughs, really, uh, culminating in massive amounts of, of walkthrough documentation and control matrices and, and all of that.

Very, very granular.

Um, and it's understandable because it was a new thing.

People didn't really know, you know, how should we do this.

A lot of folks, I was in Big Four at the time when this came out, so I was there from the, from the get-go, and everybody was sort of scrambling to figure out, how are we gonna do this? And, um, you know, the re- the, the reaction was, "Let's just document everything," right? So that happened.

And a few years went by and people kind of thought about it a little bit more and said, "Is this the right thing to do? Is this, does it make sense? Is this really risk-based in terms of how we're going about doing this work?" And so the PCAOB came out with another standard, AS5, uh, 2007, and in that document the, the, the thinking was, "Let's take this up a notch.

insane.So if there is a will, there is a way, right? So honestly, to go public, the requirements are actually pretty simple.

In the US, you really need just two years of PCAOB audits, right? So what that means is two years of audits, right? Meeting the public company accounting standard, right? So that takes maybe a couple months.

In terms of C-suite, in terms of reporting, you can get them all hired and ready over the course of that go public process.

Yep.

But even then, can you achieve standards and safety by putting everybody in a straitjacket and then the trade-off is limiting innovation, limiting the variety of viable business models? Yeah.

maybe i mean that's what we had with the fis visor jack henry where we started from so it's like i'm not sure it's possible to have both of these simultaneously like examples of other organizations that you know came to mind were like finra which finra has as i understand it like a specific regulatory uh blessing from the sec to actually operate the pcaob uh the FASB, and then we already talked about 1033.

But even looking at things like the PCAOB, which I'm not an accountant, nor do I want to be one, it's like that's also an area where things are much squishier.

Accounting, as much as you think it would be, it's not cut and dried how you treat certain things in a P&L or on your balance sheet.

And I would, having spent... as much time as I've spent in this sort of like bath partnership space.

And the Boston Fed has written on this.

The PCOB has written on it.

There are several major entities that are highly respected that have raised their hand and said, we've got a problem here in Denmark.

And And so hopefully we can contain it to this place.

According to Nasdaq, a record number of Chinese companies applied to list on US exchanges both this year and last, with China- and Hong Kong-based companies dominating the US micro-cap IPO market.

The PCAOB, the US audit regulator which was threatened with being shuttered earlier this year, has faced difficulties in the past inspecting many of the Chinese accounting firms, that audit US-listed companies.

In such cases, the PCAOB can initiate actions that lead to a company's delisting from US stock exchanges if it doesn't provide an audit from a compliant auditor.

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It's usually a week or two, you know, maybe a couple of weeks delay.

Also, it depends on how ready the company is, right? Are there PCAOB financials in place, et cetera.

And sometimes that can be the long pole in the tent for somebody delaying the S4.

Right, right.